On March 21, 2022, the Securities and Exchange Commission (SEC) proposed a rule to enhance and standardize climate-related disclosures for investors. The proposed rule would require public companies to provide information about their climate-related risks and opportunities, including their greenhouse gas emissions, their plans to reduce emissions, and the financial impacts of climate change.
The proposed rule is based on the premise that climate change is a material risk to investors. The SEC has stated that “climate change is already having a significant impact on the global economy, and these impacts are expected to grow in the coming years.” The SEC believes that investors need better information about climate-related risks and opportunities in order to make informed investment decisions.
The proposed rule would require public companies to disclose the following information:
- Their greenhouse gas emissions, including Scope 1, 2, and 3 emissions
- Their plans to reduce emissions
- The financial impacts of climate change, including the costs of adapting to climate change and the risks of stranded assets
- The governance structure for managing climate-related risks and opportunities
The proposed rule would also require public companies to disclose information about their climate-related risks and opportunities in their annual reports and proxy statements.
The SEC is seeking public comment on the proposed rule until June 17, 2022. The SEC will consider all comments received before finalizing the rule.
The proposed rule has been met with mixed reactions from the public. Some investors and environmental groups have praised the SEC for taking action on climate change. Others have expressed concerns about the costs and complexity of the proposed rule.
The SEC is expected to finalize the rule in late 2022 or early 2023. Once the rule is finalized, public companies will have two years to comply.